Question

Poehling Medical Center has a single operating room that is used by local physicians to perform surgical procedures. The cost of using the operating room is accumulated by each patient procedure and includes the direct materials costs (drugs and medical devices), physician surgical time, and operating room overhead. On January 1 of the current year, the annual operating room overhead is estimated to be: Disposable supplies $230,600 Depreciation expense 41,600 Utilities 24,200 Nurse salaries 346,200 Technician wages 113,400 Total operating room overhead $756,000 The overhead costs will be assigned to procedures based on the number of surgical room hours. Poehling Medical Center expects to use the operating room an average of eight hours per day, seven days per week. In addition, the operating room will be shut down two weeks per year for general repairs.

a. Calculate the estimated number of operating room hours for the year. hours

b. Determine the predetermined operating room overhead rate for the year. $ per hour

c. Bill Harris had a 7-hour procedure on January 22. How much operating room overhead would be charged to his procedure, using the rate determined in part

d. During January, the operating room was used for 186 hours. The actual overhead costs incurred for January were $49,100. Determine the overapplied operating overhead or underapplied operating overhead for the period. Enter your answer as a positive number. $

Answer 1

a)	No. of hours per day			8
	No. of days in a week			7
	Hours per week			56
	No. of weeks in a year (excl. two weeks)			50
	No. of operating room hours for the year			2800

b)	Predetermined OH rate		=	Total operating room OH / No. of operating hours for the year
			=	$ 756000 / 2800
			=	$ 270.00	per hour

c)	Room OH charged		=	7 hours x $ 270
			=	$ 1,890.00

d)	Actual OH cost incurred				$ 49,100.00
	OH cost applied		(186 hours x $ 270)		$ 50,220.00
	Overapplied OH				$   1,120.00